Many life events are directly related to (or cause) financial
events that are faced at the same time. Preparing for the financial aspects
of these events can help to reduce the stress that often accompanies major
changes.
Remodeling your home or making major repairs.
Home equity loans have become a major source of funds used when making
improvements to homes. Home equity loans can be ideal funding sources for
this use. The application process is usually easy and inexpensive with funds
available when needed. This avoids paying interest on funds you don't need.
Home equity loans usually have attractive interest rates and the interest is
tax-deductible. If you are considering a major home improvement, you may want
to investigate this source of funds.
Buying a home. Buying a first or new home can be
one of the largest financial transactions of your life. Investigating the
mortgage options before when you start looking at homes can help you focus on
a home you can afford and help keep you focused on the home selection and
purchase negotiation parts of the process. You may want to talk to a lender
to get some form of pre-qualification or at least learn what the current
rates are and how much your monthly payments would be for different size
mortgages.
Changing jobs. It is seldom easy to change
employers. New responsibilities, new co-workers and a new environment can be
stressful. In addition, you will probably get a distribution from your old
employer's retirement plan. Once you get that distribution, you have
important decisions to make. You must move the funds into another qualified
plan or IRA within 60 days to avoid paying taxes on the distribution. You
must also make investment decisions. Retirement plan distributions are often
the largest single sum an individual ever has to invest at one time.
Sometimes, a new employer's plan can accept transfers as well. If changing
jobs is in your near-term future, investigate your options early and to make
the transition less stressful.
Retirement. After a career, venturing into
retirement brings many changes. Along with Social Security benefits, your
existing assets must pay for a major portion of your living expenses. Your
living expenses will probably fall somewhat, perhaps by 20% to 30%. You will
probably want to modify your investment strategies to be more conservative.
While you are young and still accumulating assets, it can be easier to absorb
a fall in the value of your portfolio because you have time to recoup your
losses. During retirement, a significant fall in your portfolio can be
troubling. You may want to consider a more conservative asset allocation with
more of your funds in cash and shorter-term fixed income investments.
Funding a child's college education. The cost of
a four-year college education is expensive. Annual college costs at private
out-of-state institutions can run over $30,000. Even state sponsored schools
can be at least half that amount. Paying those college bills can be tough if
you do not start saving early. Make time your ally by establishing a regular
savings program and taking advantage of some of the new tax-advantaged
programs like Education IRAs and Section 529 Plans.
